The Chinese banking industry has been improving the emergency response plan, upgradingearly warning systems for financial risks and conducting pressure tests for comprehensive riskmanagement, the China Banking Regulatory Commission said on Friday.
As of the end of June, the nonperforming loan ratio of commercial banks increased to 1.81percent, up 6 basis points from the previous quarter and 31 basis points from the previous year.
During the same period, loan loss provisions among Chinese financial institutions rose 16.1percent from a year earlier to 3.47 trillion yuan ($519 billion), and the provision coverage ratiostood at a relatively high level of 161.3 percent, according to the CBRC.
To reduce the existing credit risk, China re-launched a pilot program on NPL securitization thisyear after halting the business in 2009. Bank of China Ltd and China Merchants Bank Co Ltdissued their first-ever NPL-backed securities in May. One backed by corporate NPLs was worth301 million yuan, while the other backed by credit card NPLs was worth 233 million yuan.
On June 28, China Merchants Bank Co Ltd issued another securities backed by small andmedium-sized companies' NPLs at the size of 470 million yuan, with the statutory period of fiveyears. Among the total, the 360-million-yuan senior tranche was subscribed 1.86 times at aninterest rate of 3.98 percent, and the 110-million-yuan equity tranche was sold at a 2 percentpremium.
